Motley Fool Misleading Pitch

Motley Fool is a leading “Financial Advice” website. The Motley Fool has offices in the UK, Australia, Canada, Singapore, and Germany. In June of 2009, they launched a new fund, The Motley Fool Independence Fund (Ticker: FOOLX), (with a 1.30% management fee) that they claim (below) has returned 11.36% annually.

Here’s their pitch…

As of the quarter-ending June 30, 2016, the Independence Fund has returned 11.36% annually since inception to investors like you, beating the MSCI World Index –10.90% annually — and the FTSE Global All Cap Net Tax Index — 10.36% annually.

Interesting…. they don’t compare their results to the S&P500 or VTI. Both of these benchmarks beat their fund by over 2 percentage points.

Here is their entire advertisement – sent to all their subscribers (1,000,000+)

Dear Investor,

In the summer of 2009, we approached investors like you with an announcement that might have seemed strange at the time.

The Motley Fool, of all people, had decided to launch a mutual fund. This was after 15 years of complaining about the mutual fund industry!

But it was also after years of receiving comments from “Foolish” investors who didn’t have the time or desire to manage their own portfolios.

You might have missed our announcement. After all, it was hard to hear us among the chorus of nay-sayers.

Chuck Jaffe of Marketwatch called our first fund the “Stupid Investment of the Week.”

We heard those zingers, and you might have heard them, too.

But we hope you also heard what we had to say…

We said our goal was to combine “the ease and convenience of mutual fund investing with the confidence that comes from investing with a friend you can trust.”

We promised that we’d be transparent, and that we’d “talk to you frankly, in plain English.”

We reminded you that we were long-term, buy-and-hold investors at heart. That we wanted to invest in “companies, not stocks.” That we planned to leave the market-timing to others…

And we told you that through a process of deep, fundamental analysis, we thought we could beat the broader market over the long-term.

With those promises in mind, we boldly entered the world of mutual funds, launching The Motley Fool Independence Fund (Ticker: FOOLX).

And we were THRILLED with the response from individual investors. Thanks to them, we raised over $100 million in our first year!

You may have been one of those early investors. And if you were, we thank you for placing your trust in us.

But if you didn’t hear us back then, or if you’re new to investing, we hope you’ll take this opportunity to give The Motley Fool Independence Fund a place in your financial plan. Allow me to explain why…

A PROVEN Track REcord Of Success…And Foolishness

Seven years after we launched, I’m proud to tell you that the Motley Fool Independence Fund (Ticker: FOOLX) is alive, kicking, and delivering on our early promises.

As of the quarter-ending June 30, 2016, the Independence Fund has returned 11.36% annually since inception to investors like you, beating the MSCI World Index –10.90% annually — and the FTSE Global All Cap Net Tax Index — 10.36% annually.

That effort has been good enough to earn an overall 4-star rating (out of 5) from Morningstar!**

(Investor Share Class. Based on risk-adjusted returns, as of 6/30/2016, out of 940 World Stock Funds.)

But more important…we’ve been doing it the way that the Motley Fool has preached for over 23 years. We’ve been investing in what we believe are great companies and holding them for the long-term.

Want proof? Well, The Motley Fool Independence Fund has turnover of 21%. By comparison, according to the Investment Company Institute, the average asset-weighted turnover rate for equity mutual fund investors from 1980-2014 was 61%.

That’s important for a couple of reasons. First, turnover within a mutual fund portfolio can incur costs. Higher turnover portfolios get hit more often by those silent expenses that can eat into returns: spreads and commissions.

Second, we believe our low turnover and our long-term investment horizon allow us to understand the companies we invest in inside and out. And we believe that allows us to better serve investors like you.

Those are a few of the reasons I’d like you to consider investing in The Motley Fool Independence Fund (Ticker: FOOLX) today.

But they aren’t the only reasons. If you can spare a few minutes, I’d like to tell you a little more…

A Commitment To Transparency And Communication

We know that when you invest your money into a mutual fund, you’re placing your trust in someone else’s hands to help you achieve your financial dreams.

And we know that giving up control like that can be difficult, especially in the often-confusing world of finance.

Back in 2013, I wrote the following to our shareholders:

“When you join Fool Funds by investing with us, we view that as something sacred. There are lots of hopes and dreams that are wrapped up in those assets you’ve entrusted to us — they’re not just numbers…You’ve entrusted something precious to us. We won’t forget it.”

I believe those words just as strongly today as I did back then. That’s why my team and I run The Motley Fool Independence Fund (Ticker: FOOLX) with an emphasis on keeping shareholders informed.

For example, the SEC requires that mutual fund companies publish their full list of portfolio holdings just twice a year.

But we publish that list EACH MONTH on our website, FoolFunds.com, allowing you to know where your money is invested.

Each month, we publish our most recent fund results, allowing you to keep up with our performance. When our returns are good, we celebrate our success with you. When we hit a rough patch, we make sure we keep you in the loop.

Each month, our team of experienced portfolio managers publishes our latest thoughts and insights on the stock market through our free shareholder newsletter. We want to keep you educated!

Starting this year, we also publish video investing updates to keep you informed on the important issues you need to know.

And every year, we celebrate investors like you with an annual shareholder party at our office in Alexandria, Virginia.

It should be clear that when you invest with us, you’re investing with a team that values your trust more than anything. We work hard to earn that trust each day.

But that’s not all…

AN INVESTING STRATEGY THAT CAN DIVERSIFY YOUR PORTFOLIO…

If you’ve had money in stocks during the last 12 months, you know that the market can often feel like a bumpy ride.

And one thing I’ve encountered over the last 20 years is that the emotional stress of investing can sometimes keep potential investors on the sideline. After all, no one wants to invest in a stock and watch it drop in value.

One way you can save yourself some stress is through portfolio diversification. And we believe The Motley Fool Independence Fund (Ticker: FOOLX) is a great diversification tool.

You see, by investing in the Independence Fund, you’re investing in a basket of companies, which can spread out your investing risk and smooth the returns you experience as an investor.

At the end of June, the fund held positions in 65 different companies, with no holding being larger than 4%.

With that type of diversification, you won’t have to stay up at night worrying that one wrong stock will sink your retirement dreams.

Over the last five years, our team of portfolio managers has traveled to places like China, Japan, Korea, Peru, Oman, England, Germany and more to conduct on-the ground research on international companies.

At the end of June, the Independence Fund had roughly 50% of its holdings in American companies, and the rest spread out in 20 other countries across the globe.

Such a mix gives investors a chance to invest internationally without having to do the research themselves.

Finally, the Independence Fund holds investments in companies of all sizes — from large-caps to small-caps.

And I’m happy to report that the Motley Fool Indpendence Fund has been able to accomplish all this while maintaining “average” risk over the last three years according to Morningstar…and “below-average risk” over the last five years.I

A FOOLISH SHAREHOLDER EXPERIENCE CREATED TO MEET YOUR GOALS…

There are other ways The Motley Fool Independence Fund (Ticker: FOOLX) tries to be different from your typical mutual fund…

Fees: For starters, Motley Fool Independence Fund is a no-load fund. That means you never pay an up-front sales charge or commission to invest with us. You aren’t made to pay so-called 12b-1 fees to help us market the fund, either.

Investor Alignment: The Motley Fool has $1 million of its own money invested in Motley Fool Independence Fund.

In addition, as noted in our regulatory documents, the Fool Funds portfolio managers have a combined $1 million of their own money invested in the Independence Fund as well! (As of 10/31/2015.)

So you see, our interests really are aligned with yours!

Unwavering temperament: Because we believe that investing for your future is a marathon, not a sprint, we don’t try to time the ups and downs of the market. We don’t get rattled in rocky waters… or chase the latest Wall Street fad.

We invest your money with confidence — comfortable in the knowledge that if we’ve done our homework and bought great companies at good prices, the market may eventually see it our way.

Frank, friendly communications: We don’t hide from you if things get tough. We’ll talk to you frankly, in plain English, like a trusted partner.

At Motley Fool Funds, we hope you’ll look forward to hearing from us — as we will certainly look forward to hearing from you.

21st-century convenience: Thanks to our secure, interactive website, FoolFunds.com, getting invested and managing your account has never been easier or more convenient.

A word about risk…

Of course, any investment comes with risks. We don’t promise that you’ll make money with the fund. Over any given time period, no matter how hard or how long the fund’s investment advisor works, the value of the fund could go down and you could lose money, including principal. We endeavor to find companies that are both great businesses and great investments, but there can be no guarantee that we will succeed.

And because the fund is free to invest in companies of any size around the world, at times we may be heavily invested in small-cap stocks and foreign securities, each of which presents larger risk. Small- and mid-cap companies may lack the management experience, financial resources, product diversification, and competitive strength of larger companies. These stocks tend to be more volatile and less liquid than their large-cap counterparts. Fluctuations in currency exchange rates can cause losses when investing in foreign securities, with emerging markets presenting additional risks of illiquidity, political instability, and lax reguation.

Also, the fund is not for everyone. If you’re seeking something other than long-term capital appreciation — for example, current income to live on — or if you’re not comfortable with the risks, or if you expect to need your money back soon, this is not the fund for you. We strongly encourage you to read more about the fund’s strategies and risks in its prospectus.

Are You Ready to Invest? Hold On! Don’t Send Us a Penny Unless…

Because we intend to be long-term, buy-and-hold investors ourselves. And not just because it makes our lives easier.

No. We firmly believe — and the vast preponderance of evidence shows — that attempts at market timing put YOU at a grave disadvantage and greatly reduces your chances of out-performing the market over the long term.

For this reason, and to help keep the fund’s expenses low, we discourage small accounts and short-term trading by assessing a $24 annual fee on accounts of less than $10,000 in value, as well as a 2% redemption fee on shares redeemed within 90 days of purchase.

So, while we hate to turn investors away, if you’re not a patient, long-term investor, Motley Fool Independence Fund may not be for you.

After all, not only are you trusting us with your hard-earned money — an honor we take very seriously, I assure you — our friends and family will be investing right alongside you…

Get Invested Now!

If YOU are a patient, long-term investor, then The Motley Fool Independence Fund (Ticker: FOOLX) may be right for you.

We hope you’ll join us in this exciting venture! Taking the next step is easy…

There are two ways to get started investing right now. The first is to use your online broker. You can now invest in The Motley Fool Independence Fund (FOOLX) through most brokerages, including Charles Schwab, TD Ameritrade, Scottrade, USAA, Vanguard and more.

The second way to get started is to open a new Fool Funds account directly on our website. Simply click the link to get started. You’ll have the chance to look over our Fund prospectus. You’ll also have the chance to purchase shares.

Whichever way you want to invest, we hope to have you join our shareholder family soon.

Here’s to a great future investing together!

Fool on,

Not So Fast!

Here is the comparison of their fund to the S&P500 and VTI. FOOLX is the green line; BELOW the other two funds, S&P500 and VTI!